Dan Bertram, the principal of BRT Corp., said a sufficient water supply is "critical" to building multifamily housing developments, including Kennedy Place, which is planned for the north end of Main Street.

While that project already has preliminary approvals in place and wouldn't be affected, both Bertram and Boughton said the ban could restrict future housing development.

"Mulitfamily housing is a necessary part of the housing stock," Bertram added. "It allows you to develop a price point you can't get to with single family homes, and you need public utilities available to service the projects."

Public Utilities Superintendent David Day explained that without the 1.2 million gallons of water available in Lake Kenosia, the city's water supply would drop to about 6.9 million gallons per day.

He said that is dangerously close to the average 6.7 million gallons per day used in 2012.

It's also under the "safe yield" ratio that state officials require of public water systems so there is enough water to meet demand during a once-in-a-100-year drought.

The problem involves an ongoing battle between the city and state environmental officials over whether swimming is allowed in the lake.

While historically swimming has always been allowed at Lake Kenosia, state regulations typically don't allow swimming in public water supplies.

Kenosia isn't used as a daily water source. Water is pumped out of the lake, when other city reservoirs are under about 90 percent capacity.

"We typically use water from the lake to make sure the West Lake reservoir is full before the summer peak season," Day said, adding that the water is treated at the city's treatment plant.

"We've sampled the lake, and it meets all the state's water quality requirements."

The last time the city pumped water of the lake, he said, was in 2010.

Last year the state health department ruled that swimming in the lake was unacceptable.

But state Rep. David Scribner, R-Brookfield, got language passed in a bill in the last session of the General Assembly that said swimming would have to be allowed at Kenosia.

"The health department then told us, `Fine. But you can't use it for drinking water,'" Boughton said.